MANHATTAN — Gov. Andrew Cuomo proposed a plan to slash billions from the state's budget, including a 2 percent cut in Medicaid spending, a $1.5 billion reduction in school aid and nearly 10,000 state worker layoffs, according to a plan unveiled Tuesday.

The budget proposes a nearly 3 percent reduction in overall state spending in an attempt to eliminate a projected $10 billion budget deficit. The state's budget now stands at $132.9 billion in the coming fiscal year.

"We're at a crossroads and there are two roads. I believe if we continue doing what we're doing the state goes down the road to ruin," Cuomo said during a speech formally announcing the austere plan, which also calls for a massive government restructuring, the merger or consolidation of 11 state agencies into four, and a 10 percent cut in aid for SUNY and CUNY schools.

New York Gov. Andrew Cuomo delivered his first State of the State address at the Empire State Plaza Convention Center in Albany, N.Y., Wednesday, Jan. 5, 2011.View Full Caption

AP Photo/Mike Groll

The plan also cuts $100 million from the Metropolitan Transit Authority's operating budget, and calls for a 30 percent reduction in juvenile justice capacity and 3,500 fewer state prison beds.

Without the cuts, the governor's office said that state spending would have ballooned another 12 percent, thanks to automatic, built-in increases that he described as "a death spiral" disconnected from reality.

New York City relies heavily on money from the state, especially when it comes to education and Medicaid, and Mayor Michael Bloomberg had repeatedly warned residents to brace for pain, saying Monday that "anybody that thinks that we're not going to have a billion dollars — or even a little bit more — less to spend on education is not realistic."

According to the budget, the city is slated to lose $518 million in state education aid in 2011-2012, with a drop from $8.1 billion this school year to $7.6 billion the next. But Bloomberg said that based on the commitment the state had made to New York City's education budget last year, the city will actually receive $1.4 billion less in aid than expected for 2011-2012.

"Unfortunately, the budget does not treat New York City equitably," he said, adding that, without additional changes to state law, "We will be looking at thousands of layoffs in our schools and across City agencies."

Earlier, the mayor had warned that stripping $1 billion in education aid could force the city to fire up to 21,000 teachers — roughly equivalent to every new teacher hired over the past five years. He later said that the cutbacks would likely come through a combination of layoffs and other cutbacks, since the city can't afford to lose one quarter of its teaching force.

But Cuomo argued that local municipalities could meet the cutbacks with "absolutely no need for layoffs."

"Why they get paid more than the governor of the state?" I really don’t understand," he said.

United Federation of Teachers President Michael Mulgrew agreed.

"The Mayor has threatened to lay off a quarter of the teaching force, but Governor Cuomo made it clear today that there is nothing in the proposed state budget that would require local layoffs," he said in a statement, adding that the governor’s planned cut to city schools amounts to only about three percent of the city's school's budget.

Even before the newly-anointed governor had given his first formal budget address, the criticism had begun.

Leonie Haimson, the executive director of Class Size Matters, slammed the governor's plan to cut education spending and called for higher taxes instead.

"Wall Street bankers can afford to pay a little more to help our kids receive a better chance to learn, especially as their mistakes caused the economy to collapse in the first place," she said in a statement.

City Councilman Robert Jackson, who chairs the Education Committee, also reacted with anger, saying the cuts "penalize students who had nothing to do with creating those deficits."

Public transit advocacy group Transportation Alternatives also slammed Cuomo's proposal to cut $100 million from the MTA.

"Governor Cuomo campaigned on restoring honesty and ethics to Albany, but when it comes to transit nothing much has changed," Executive Director Paul Steely White, said in a statement.

The MTA vowed in a statement not to raise fare or tolls or make additional service cuts, despite the cuts.

Cuomo ended his address pleading with fellow lawmakers to pass his budget plan, warning that the state "is functionally bankrupt" and has no other choice.

"It is a time when we're sending out an SOS to save our state," he said. "I know this is going to be hard...I get that. You're going to hear it. You're going to feel it. This is going to inflame the Albany establishment."

But, he told reticent lawmakers, "The people get it and the people are with you."

During his PowerPoint-assisted State of the State address in January, a more optimistic Cuomo had called for a complete "financial reinvention" of the State of New York, beginning with a freeze on state spending and state workers' wages, a long-promised property tax cap and cutbacks across the board. The State Senate passed Cuomo's property tax cap proposal earlier this week.

A poll last month found that 70 percent of voters have a favorable view of the governor and more than two thirds trust him to "do the right thing for New York."

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